<dhhead>Independent Auditors’ Report</dhhead>
To the members of Karnavati Finance Limited
Report on the Indian Accounting Standards (Ind AS) Financial Statements
We have audited the accompanying financial statements of Karnavati
Finance Limited (the "Company"), which comprise the Balance sheet as at March
31,2023, and the Statement of Profit and Loss for the period then ended, the Cash flow
Statement for the year ended March 31, 2023 and a summary of significant accounting
policies and other explanatory information.
Management’s responsibility for the financial statements
The Company’s Board of Directors is responsible for the matters
stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to
the preparation of these standalone financial statements that give a true and fair view of
the financial position, financial performance and cash flows of the Company in accordance
with the accounting principles generally accepted in India, including the Indian
Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the
Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of
adequate accounting records in accordance with the provisions of the Act for safeguarding
the assets of the Company and for preventing and detecting frauds and other
irregularities; selection and application of appropriate accounting policies; making
judgments and estimates that are reasonable and prudent; and design, implementation and
maintenance of adequate internal financial controls, that were operating effectively for
ensuring the accuracy and completeness of the accounting records, relevant to the
preparation and presentation of the financial statements that give a true and fair view
and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for
assessing the Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
That Board of Directors are responsible for overseeing the
Company’s financial reporting process.
Auditors’ responsibility
Our objectives are to obtain reasonable assurance about whether the
Statement as a whole are free from material misstatement, whether due to fraud or error
and to issue an auditors report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with SAs
will always detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the
basis of the Statement.
As part of an audit in accordance with SAs, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the
statement, whether due to fraud or error, design and perform audit procedures responsive
to those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion.
Forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the companys
internal control.
• Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the Board of
Directors
• Conclude on the appropriateness of the Board of Directors use
of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Companys ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in our auditors
report to the related disclosures in the financial results or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditors report. However, future events or conditions may
cause the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the
Statement, including the disclosures, and whether the financial results represent the
underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among
other matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our
audit.
Our responsibility is to express an opinion on these financial
statements based on our audit. We have taken into account the provisions of the Act, the
Accounting and Auditing Standards and matters which are required to be included in the
Audit Report under the provisions of the Act and the Rules made there under. We conducted
our audit in accordance with the Standards on Auditing specified under Section 143(10) of
the Act. Those Standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the financial statements
are free from material misstatement.
Opinion
In our opinion and to the best of our information and according to the
explanations given to us, the aforesaid financial statements give a true and fair view of
in conformity with the:
(a) In the case of Balance sheet, of the State of Affairs of the
Company as at March 31, 2023; and
(b) In the case of Statement of profit and loss, of the Profit for the
Year ended on March 31, 2023; and
(c) Its cash flow statement for the year ended March 31, 2023.
(d) Statement of changes in the equity for the year ended March 31,
2023.
Basis for Opinion
We conducted our audit in accordance with Standards on Auditing (SAs)
specified under section 143(10) of the Companies Act, 2013. Our responsibilities under
those Standards are further described in the Auditor’s Responsibilities for the Audit
of the Financial Statements section of our report. We are independent of the Company in
accordance with the Code of Ethics issued by the Institute of Chartered Accountants of
India together with the ethical requirements that are relevant to our audit of the
financial statements under the provisions of the Companies Act, 2013 and we have fulfilled
our other ethical responsibilities in accordance with these requirements and the
ICAI’s Code of Ethics.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement
were of most significance in our audit of the financial statements of the current period.
These matters were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Key Audit Matters How addressed in Audit |
How addressed in Audit |
| Indian Accounting Standards (Ind-AS) as specified under
Section 133 of the Act, read with relevant rules there under have been made |
We have evaluated the management’s process and tested
key controls around the determination of expected credit loss allowances, including
controls relating to: |
| mandatorily applicable for specified Non-Banking Finance
Companies applicable with effect from April 1st, 2019 and consequently these standalone
financial statements have been prepared by the management in compliance with the Ind AS
framework. As against the provisioning norms earlier prescribed by Reserve Bank of India
and adopted by the company in prior years, Ind-AS 109 (Financial Instruments) requires the
Company to recognise Expected credit Loss (ECL) on financial assets, which involves
application of significant judgement and estimates including use of key assumptions such
as probability of default and loss given default |
- The identification of events leading to a significant
increase in risk and credit impairment events; and |
| Refer Note 29 to the Financial Statements |
The determination of the impaired credit loss allowances and
the key assumptions including probability of default and loss given default on a forward
looking basis having regard to historical experiences. |
|
We understood and assessed the appropriateness of the
impairment methodology developed and used by the management at the entity level. This
included assessing the appropriateness of key judgements. We tested the accuracy of key
data inputs and calculations used in this regard. |
|
We found that these key controls as above, were designed,
implemented and operated effectively, and therefore have placed reliance on these key
controls for the purposes of our audit of ECL and impairment loss allowances |
Information Other than the Financials Statements and Auditor’s
Report thereon (Other Information)
The Company’s Board of Directors is responsible for the other
information. The other information comprises the information included in the Corporate
Overview, Board’s Report, Management Discussion and Analysis Report and Report on
Corporate Governance in the Annual Report of the Company for the financial year 2022-23
but does not include the financial statements and our auditor’s report thereon. The
reports containing the other information as above are expected to be made available to us
after the date of this auditor’s report.
Our opinion on the financial statements does not cover the other
information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information identified above when it becomes available
and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated.
When we read the reports containing the other information, if we
conclude that there is a material misstatement therein, we are required to communicate the
matter to those charged with governance.
Report on other Legal and Regulatory Requirements
(1) As required by the Companies (Auditors Report) Order, 2016
("the Order"), issued by the Central Government of India in terms of sub-section
(11) of section 143 of the Companies Act, 2013, we give in the Annexure 1, statement on
the matters specified in paragraphs 3 and 4 of the order to the extent applicable.
(2) As required by Section 143(3) of the Act, we report that:
a. We have obtained all the information and explanations which, to the
best of our knowledge and belief, were necessary for the purpose of our audit;
b. In our opinion, proper books of account as required by law have been
kept by the Company so far as appears from our examination of the books of account;
c. The Balance Sheet and Statement of Profit and Loss and Cash Flow
statement dealt with by this report are in agreement with the books of account;
d. In our opinion, the balance sheet and statement of profit and loss
and Cash Flow Statement dealt with by this report comply with the Indian Accounting
Standards referred to in section 133 of the Act read with rules issued thereunder;
e. On the basis of written representations received from the directors
as at 31st March 2023, and taken on record by the Board of Directors, we report that none
of the directors is disqualified as at 31st March 2023, from being appointed as a director
in terms of subsection (2) of section 164 of the Companies Act, 2013.
f. With respect to the adequacy of the internal financial controls over
financial reporting of the Company and operating effectiveness of such controls, refer to
our separate Report in "Annexure 2" to this report.
g. With respect to the other matters to be included in the
Auditor’s Report in accordance with Section 197(16) of the Act, in our opinion and to
the best of our information and according to the explanations given to us: the
remuneration paid/ provided by the Company to its directors during the year is in
accordance with the provisions of section 197 of the Act.
h. With respect to the matters to be included in the Auditor’
Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in
our opinion and to the best of our information and according to the explanations given to
us:
i. The Company has disclosed impact of pending litigations on its
financial position in its financial statements - .
ii. The Company has not entered into any long-term contracts including
derivative contracts, requiring provision under applicable laws or accounting standards,
for material foreseeable losses.
iii. There are no amounts which required to be transferred, to the
Investor Education and Protection Fund by the Company.
Annexure 1 to the Independent Auditor’s Report of even date on
financial statements of Karnavati Finance Limited
In terms of the information and explanations given to us and the books
and records examined by us in the normal course of audit and
to the best of our knowledge and belief, we state as under:
(i) Property, Plant & Equipment and Intangible Assets:
a) The Company has maintained proper records showing full particulars,
including quantitative details and situation of Property, Plant and Equipment and relevant
details of right-of-use assets.
b) The Company has maintained proper records showing full particulars
of intangible assets.
c) Property, Plant and Equipment have been physically verified by the
management at reasonable intervals; any material discrepancies were noticed on such
verification and if so, the same have been properly dealt with in the books of account.
d) According to the information and explanation given to us the title
deeds of all the immovable properties. (Other than properties where the Company is the
lessee and the lease agreements are duly executed in favour of the lessee) disclosed in
the financial statements are held in the name of the company.
e) The Company has not revalued any of its Property, Plant and
Equipment (including right-of-use assets) and intangible assets during the year.
f) No proceedings have been initiated during the year or are pending
against the Company as at March 31, 2023 for holding any benami property under the Benami
Transactions (Prohibition) Act, 1988 (as amended in 2016) and rules made thereunder.
(ii) Inventory and working capital:
a) The stock of inventory has been physically verified during the year
by the Management at reasonable intervals, except stock lying with third parties.
Confirmations of such stocks with third parties have been obtained by the Company in most
of the cases. No discrepancies were noticed on verification between the physical stocks
and the book records that were 10% or more in the aggregate for each class of inventory.
b) According to the information and explanations given to us and on the
basis of our examination of the records of the Company, the Company has not sanctioned
working capital limits in excess of five crore rupees, in aggregate, from banks on the
basis of security of current assets.
(iii) Investments, any guarantee or security or advance or loans given:
a) According to the information and explanations given to us and on the
basis of our examination of the records of the Company, the Company has not made any
investments, provided guarantee or security or granted any advances in the nature of
loans, secured or unsecured, to companies, firms, limited liability partnerships or any
other parties during the year.
1. The Company has not provided any loans or advances in the nature of
loans or stood guarantee or provided security to any other entity during the year.
2. In our opinion, the investments made, guarantees provided, security
given and the terms and conditions of the grant of all loans and advances in the nature of
loans and guarantees provided are not prejudicial to the company’s interest;
3. In respect of loans granted by the Company, the schedule of
repayment of principal and payment of interest has been stipulated and the repayments of
principal amounts and receipts of interest have generally been regular as per stipulation.
4. In respect of loans granted by the Company, there is no overdue
amount remaining outstanding as at the balance sheet date.
5. No loan granted by the Company which has fallen due during the year,
has been renewed or extended or fresh loans granted to settle the over dues of existing
loans given to the same parties.
6. The Company has not granted any loans or advances in the nature of
loans either repayable on demand or without specifying any terms or period of repayment
during the year. Hence, reporting under clause 3(iii)(6) is not applicable.
(iv) Loan to directors:
a) According to the information and explanations given to us and on the
basis of our examination of the records, the Company has not given any loans, or provided
any guarantee or security as specified under Section 185 of the Companies Act, 2013 and
the Company has not provided any guarantee or security as specified under Section 186 of
the Companies Act, 2013. Further, the Company has complied with the provisions of Section
186 of the Companies Act, 2013 in relation to loans given and investments made.
(v) Deposits:
a) The company has not accepted any deposits from the public within the
meaning of sections 73 to 76 or any relevant provisions of the 2013 act and the rules
framed there under to the extent notified.
(vi) Maintenance of Cost Records:
a) According to the information and explanations given to us, the
Central Government has not prescribed the maintenance of cost records under Section 148(1)
of the Companies Act, 2013 for the products manufactured by it (and/ or services provided
by it). Accordingly, clause 3(vi) of the Order is not applicable.
(vii) Statutory Dues:
a) The company is regular in depositing with appropriate authorities
undisputed statutory dues including Provident Fund, Employees’ State Insurance,
Income Tax, Duty of Customs, GST, Cess and any other statutory dues applicable to it.
According to the information and explanations given to us, there is undisputed amounts
payable in respect of income tax, sales tax, customs duty, excise duty and cess were in
arrears, as at 31st March 2023 for a period of more than six months from the date they
became payable.
Name of Statue |
Nature of Dues |
Financial Year |
Amount(Rs.) |
| Income Tax Act 1961 |
Income Tax |
2011-12 |
7,400 |
| Income Tax Act 1961 |
Tax Deducted at Source |
2015-16 |
510 |
| Income Tax Act 1961 |
Tax Deducted at Source |
2017-18 |
20 |
| Income Tax Act 1961 |
Tax Deducted at Source |
2020-21 |
190 |
| Income Tax Act 1961 |
Tax Deducted at Source |
2021-22 |
940 |
b) According to the information and explanations given to us, there are
no dues of sales tax, income tax, custom duty, wealth tax, GST, excise duty and cess which
have not been deposited on account of any dispute.
Name of Statue |
Nature of Dues |
Financial Year |
Amount(Rs.) |
Income Tax Act 1961 |
Income Tax |
2020-21 |
5,45,770 (Under Rectification) |
(viii) Disclosure of Undisclosed Transactions:
a) There According to the information and explanations given to us and
on the basis of our examination of the records of the Company, the Company has not
surrendered or disclosed any transactions, previously unrecorded as income in the books of
account, in the tax assessments under the Income-tax Act, 1961 as income during the year.
(ix) Loans or Other Borrowings:
a) Based on our audit procedures and according to the information and
explanations given to us, The Company has not defaulted in repayment of loans or other
borrowings or in the payment of interest thereon to any lender.
b) The Company has not been declared wilful defaulter by any bank or
financial institution or government or any government authority.
c) According to the information and explanations given to us, term
loans were applied for the purpose for which the loans were obtained.
d) On an overall examination of the financial statements of the
Company, funds raised on short-term basis have, prima facie, not been used during the year
for long-term purposes by the Company.
e) On an overall examination of the financial statements of the
Company, the Company has not taken any funds from any entity or person on account of or to
meet the obligations of its subsidiaries.
f) The Company has not raised any loans during the year on the pledge
of securities held in its subsidiaries, joint ventures or associate companies.
(x) Money Raised by IPOs, FPOs:
a) The Company has not raised moneys by way of initial public offer or
further public offer (including debt instruments) during the year and hence reporting
under clause 3(x)(a) of the Order is not applicable.
b) During the year, the Company has not made any preferential allotment
or private placement of shares or convertible debentures (fully or partly or optionally)
and hence reporting under clause 3(x)(b) of the Order is not applicable.
(xi) Fraud:
a) During the course of our examination of the books and records of the
company, carried out in accordance with the generally accepted auditing practices in
India, and according to the information and explanations given to us, we have neither come
across any instance of fraud by the company or no fraud by the Company and no material
fraud on the Company has been noticed or reported during the year.
b) No report under sub-section (12) of section 143 of the Companies Act
has been filed in Form ADT-4 as prescribed under rule 13 of Companies (Audit an and
Auditors) Rules, 2014 with the Central Government, during the year and up to the date of
this report.
c) We have taken into consideration the whistle blower complaints
received by the Company during the year (and up to the date of this report), while
determining the nature, timing and extent of our audit procedures.
(xii) Nidhi Company:
a) The Company is not a Nidhi Company and hence reporting under clause
(xii) of the Order is not applicable.
(xiii) Related Party Transactions:
a) In our opinion, the Company is in compliance with Section 177 and
188 of the Companies Act, 2013 with respect to applicable transactions with the related
parties and the details of related party transactions have been disclosed in the financial
statements as required by the applicable accounting standards.
(xiv) Internal Audit System:
a) In our opinion the Company has an adequate internal audit system
commensurate with the size and the nature of its business.
b) We have considered the internal audit report for the year under
audit, issued to the Company during the year and till date, in determining the nature,
timing and extent of our audit procedures.
(xv) Non-cash Transactions:
a) According to the information and explanations given to us and based
on our examination of the records of the company, the company has not entered into any
non-cash transactions with directors or persons connected with him. Accordingly, paragraph
3(xv) of the Order is not applicable.
(xvi) Registration under section 45-IA of RBI Act, 1934:
a) In our opinion, the company is Non-Banking Finance Company
registered under section 45-IA of the Reserve Bank of India Act, 1934 vide certificate of
registration no. 13.00064 dated February 24, 1998.
b) In our opinion, there is no core investment company within the Group
(as defined in the Core Investment Companies (Reserve Bank) Directions, 2016) and
accordingly reporting under clause 3(xvi)(d) of the Order is not applicable.
(xvii) Cash losses:
a) The Company has not incurred cash losses during the financial year
covered by our audit and the immediately preceding financial year.
(xviii) Resignation of statutory auditors:
a) There has been no resignation of the statutory auditors of the
Company during the year.
(xix) Material uncertainty on meeting liabilities:
a) On the basis of the financial ratios, ageing and expected dates of
realization of financial assets and payment of financial liabilities, other information
accompanying the financial statements and our knowledge of the Board of Directors and
Management plans and based on our examination of the evidence supporting the assumptions,
nothing has come to our attention, which causes us to believe that any material
uncertainty exists as on the date of the audit report indicating that Company is not
capable of meeting its liabilities existing at the date of balance sheet as and when they
fall due within a period of one year from the balance sheet date. We, however, state that
this is not an assurance as to the future viability of the Company. We further state that
our reporting is based on the facts up to the date of the audit report and we neither give
any guarantee nor any assurance that all liabilities falling due within a period of one
year from the balance sheet date, will get discharged by the Company as and when they fall
due.
(xx) Compliance of CSR:
According to the information and explanations given to us and based on
our examination of the records of the company, the company is not required to spent amount
towards Corporate Social Responsibility (CSR) as per the section 135 of companies’
act, 2013, reporting under clause 3(xx)(a) of the Order is not applicable for the year.
Annexure B to The Independent Auditor’s Report Of Even Date On The
Financial Statements Of Karnavati Finance Limited
Report on the Internal Financial Controls under Clause (i) of Sub
Section 3 of section 143 of the Companies Act, 2013 ("the Act")
We have audited the internal financial controls over financial
reporting of Karnavati Finance Limited ("the company") as of 31st March 2023 in
conjunction with our Audit of the standalone financial statements of the company for the
period ended on that date.
Management’s Responsibility for Internal Financial Controls
The company’s Management is responsible for establishing and
maintaining internal financial controls based on the internal control over financial
reporting criteria established by the Company considering the essential components of
internal control stated in the Guidance Note on Audit of Internal Financial Controls over
Financial Reporting issued by the Institute of Chartered Accountants of India (ICAI).
These responsibilities include the design, implementation and maintenance of adequate
internal financial controls that were operating effectively for ensuring the orderly and
efficient conduct of its business, including adherence to company’s policies,
safeguarding of its assets, the prevention and detection of frauds and errors, the
accuracy and completeness of the accounting records, and the timely preparation of
reliable financial information, as required under the Companies Act, 2013.
Auditors’ Responsibility
Our responsibility is to express an opinion on the Company’s
internal financial controls over financial reporting based on our audit. We conducted our
audit in accordance with the Guidance Note on Audit of Internal Financial Controls over
Financial Reporting (the Guidance Note ) and the standards on Auditing ,issued by ICAI and
deemed to be prescribed under section 143 (10) of the Companies Act, 2013, to the extent
applicable to an audit of internal financial controls, both applicable to an audit of
Internal Financial Controls and, both issued by the Institute of Chartered Accountants of
India Those Standards and the Guidance Note require that we comply with the ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether
adequate internal financial controls over financial reporting was established and
maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about
the adequacy of the internal financial controls system over financial reporting and their
operating effectiveness. Our audit of internal financial controls over financial reporting
included obtaining an understanding of internal financial controls over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on assessed risk. The
procedures selected depend on the auditor’s judgment, including the assessment of the
risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion on the Company’s internal
financial controls system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company’s internal financial control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external Purposes in accordance
with generally accepted accounting principles. A company’s internal financial control
over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable
detail accurately and fairly reflect the transactions and dispositions of the assets of
the company,(2) provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with authorizations of
management and directors of the company and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Inherent Limitations of internal Financial Controls over Financial
Reporting
Because of the inherent limitations of internal financial controls over
financial reporting, including the possibility of collusion or improper management
override of controls , material misstatements due to error or fraud may occur and not be
detected. Also projections of any evaluation of the internal financial controls over
financial reporting to future periods are subject to the risk that the internal financial
controls over financial reporting may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, the company , has in all material respects, an adequate
internal financial controls system over financial reporting and such internal financial
controls over financial reporting were operating effectively as at 31st March, 2023, based
on the internal financial control over financial reporting criteria established by the
Company considering the essential components of internal control stated in the Guidance
note on Audit of Internal Financial Controls Over Financial Reporting issued by Institute
of Chartered Accountants of India.
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